I’ve had several businesses. I’ve failed, and I’ve succeeded. Turns out that the difference between success and failure is just some small details. Details that often get overlooked in the crush of daily activities.
You either move towards success, or you move towards failure. You get to choose.
First, The Big Picture
Businesses succeed when they are profitable and when they have positive cash flow. Profits and Cash. Success isn’t the outer display of fancy goodies, but the inner effectiveness of decisions and actions.
Business needs customers and sales. Business needs profitable products and services. Successful businesses have efficient internal processes and operations.
Successful businesses do business well in the background, and do business well for the customers.
So, find a market (customers), find a product that solves a problem or need, sell for a profitable price, control expenses, and do it again.
And get good at each area.
Second, The Nitty-Gritty
Every day brings you a new opportunity to move towards success, or to move towards failure. You get to choose. If you don’t choose, someone else will choose for you, and that choice will most likely not be in your best interest.
So, you make your choices in advance. This is called planning. Plan today what you will do tomorrow. Think about the possibilities, your goals and circumstances, and choose to do activities that move you towards your goals, not away from them.
Plan your work then work your plan.
And you can’t do everything all at once. So, you have to choose. This is called prioritization What you end up doing first must be the most important, else you’d do something else, right? Sure, timing might influence what you do, but, doing first things first definitely moves you towards success. Not doing first things first, or sometimes at all, moves you away from success.
Finally, The Key
It all comes down to profitability and cash. Your success depends on Profits first, and Cash a very close second.
Profits come from buying products for the right price, selling those products for the right price at the right time to the right customers, and controlling all other expenses so there is profit at the end of the day.
Turns out that controlling expenses plays a bigger role than you might think.
Profit is defined as Sales minus Cost of Goods Sold, minus Expenses. If you cn get an extra dollar for your goods or services, that dollar might not end up on the bottom line. You will incur some additional variable expenses like commissions so that only part of the added sale money is available for the bottom line.
But, note: Saving a dollar when buying your products just drops to the bottom line. Saving a dollar of expenses drops it directly to the bottom line. Saving a dollar makes you more profitable than selling a dollar more.
When you spend a dollar on an expense, it takes 3 or 4 or 20 or more dollars in sales to compensate for that extra dollar gone. How many depends on your profit margin. A 5% profit means to get an additional dollar to the bottom line, you must sell $20 to get that extra dollar in profit.
Isn’t it easier to save a dollar than to sell so much more? Of course it is.
So, success in business is very much about selling, and selling more and more. Gotta do it.
But, without profits, you just have an expensive hobby that takes a lot of work.
Knowing gross profitability of each sale is important.
However, knowing and controlling all your indirect expenses is just as or more important. Keeping track of and examining every expense, and cutting those expenses that don’t contribute more profit or savings than they cost is the key to success.
Keep Profits as your main goal.